Concept for - Disputes involving trustees

In all of the media furore regarding Captain Sir Thomas Moore’s charitable trust and the conduct of his trustees, it is easy to forget that the whole story began simply and with all the best intentions. An elderly man walked in his garden during lockdown to raise money for the NHS. The story went viral and he ended up raising £38.9 million for NHS Charities Together.

Captain Tom Foundation

By the time Captain Tom passed away in February 2021 at the age of 100, his fame had reached such phenomenal levels that his family decided to set up the Captain Tom Foundation to support a variety of causes which are said to have been particularly close to his heart – including The Royal British Legion, Mind and the Cavell Nurses’ Trust.

So far, so very good and there is no doubt at all that the Captain Tom Foundation (‘CTF’) has done some positive charitable work including fundraising for nursing and midwifery staff in financial hardship in the UK and funding an additional Children and Family Social Worker at Willen Hospice.

What was not so successful was the administration of the charitable trust. In February 2022 the Charity Commission announced an investigation into how the charity was being run, with an emphasis on concerns that the charity might not be receiving all of the funds due to it from work done in the name of the charity and concerns around the charity trustee decision-making and how the Foundation was governed. This is entirely separate from the demolition order in relation to the spa complex in the family home where Captain Tom lived with his daughter Hannah Ingram-Moore and her husband Colin.

The Charity Commission are responsible for overseeing charities in the UK and they have wide investigative powers. Section 60 of the Charities Act 2011 makes it a criminal offence to knowingly or recklessly provide false or misleading information to a Charities Commission investigation. If found guilty of doing so, the punishment may be a fine or up to two years imprisonment.

At this stage, we do not know the outcome of the Charity Commission but it has been widely reported that Captain Tom’s family has decided that the CTF will be closed down when the investigation concludes. They are not the first family-run charity to run into difficulties and it is unlikely that they will be the last.

Lessons learned

So what lessons should be taken away from this good news turned bad? The biggest lesson is for anyone thinking of becoming a trustee – you must not agree to take the role on unless you know or are willing to find out and observe the rules and requirements around accepting that role.

All trustees – whether for a charity or a trust (including a family trust created by a will) must accept that they are bound by a complex set of rules and if they fail to observe those rules, they may well be in breach of trust and liable not only to being removed as a Trustee but also potentially personally liable to make up any financial loss to the trust as a result of their breach of the rules.

So what must trustees do?

Not surprisingly, trustees must obey the terms of the trust which created their role – not all trusts have identical terms and trustees need to know what ‘their’ trust allows and prohibits them from doing. They must also take control of the trust assets – you cannot look after something which you either don’t know about or you do not control.

It may seem obvious, but trustees must act in the best interests of the trust. As they are in control of the assets (or should be) they must act with the utmost integrity and make sure that they are not allowing their own interests to conflict with the trust and they must not profit from their position as trustees.

Trustees have a duty to treat beneficiaries fairly and to keep good records and accounts for the trust and keep beneficiaries informed. That does not mean that beneficiaries are entitled to know everything that the trustees know, but – depending on the type of trust – it is appropriate for beneficiaries to be kept informed and in some cases consulted regarding how the trustees intend to administer the trust and deal with the assets.

Trustees are also encouraged to take and receive professional advice on areas where they are not expert, the cost of which is paid by the trust itself.

If the trustees are complying with all of the above requirements, it is very likely that they will be fulfilling their duty of care to the beneficiaries. There is what is described as a ‘common law’ duty of care to act honestly and in good faith and with integrity and to look after the trust with as much care as a ‘prudent man of business’ would when he was looking after his own affairs.

There is also a statutory duty of care which is set out in s1 of the Trustee Act 2000. This section requires trustees to show ‘such skill and care as is reasonable in the circumstances of the case making allowance for his or her special knowledge, experience or professional status’. So a professional trustee will be expected to have a higher standard of skill and care than a lay trustee, but both professional and lay trustees will be required to have the same standard of honesty and integrity.

Disputes Involving Trustees

Litigation involving trustees is increasing and this can take many forms; whether it is between two trustees who do not agree how a trust should be administered or between trustees and beneficiaries regarding how the trust is being managed.

Trustees need to bear in mind that there are severe penalties for trustees who behave improperly – or who fail to actively protect and administer the trust. Those penalties can carry a high cost; if an application to remove a trustee is successful, there is a high chance that the trustee will have to personally bear not only their own legal costs but also the costs of the application against them. This may be on top of ‘making good’ any financial loss to the trust which was caused by their conduct.

If you are concerned about your role as a trustee – or the conduct of a trustee which is affecting you, then make sure you have taken advice as soon as possible to avoid costs escalating and to try and find a resolution which, if early enough, may avoid the need for litigation. Most trustees want to do a good job and it is much more cost effective to find out how to fulfil your trustee duties in advance rather than after a costly mistake has been made.

Tamara Hasson is a Consultant within the Inheritance and Trust Disputes team and is a full member of both the Society of Trust and Estate Practitioners (STEP) as well as the Association of Contentious Trust and Probate Specialists (ACTAPS).